The Art of an Accurate Bid: Top Ways to Improve Your Construction Estimates & How to Bid a Job
The success of your construction business hinges on completing projects within budget and on time—but how do those budgets get established? Successful bids result from a combination of art, science, and attention to detail. The more precise details are added to a bid, the more likely you are to win the job. So, what is the trick to submitting a winning bid? Keep reading to learn how improving your construction estimates can help you bid accurately and competitively. But first, why are accurate bids so important?
Inaccuracies Due to Overbidding
Overbidding a job, meaning estimating that you will need more labor hours or material than realistically required, can lead to you losing out on several projects. Many people tend to put a higher price tag on their proposals when they are unsure about the cost of materials or do not know how long will it take the team to complete the project. Contractors receive many bids that they compare to other bids or their own takeoffs to rule out the bids with significantly higher costs. The job is likely to go to a lower bidder, which means you will be back to searching for other projects.
Inaccuracies Due to Underbidding
While it is true that contractors are likely to go with the lowest priced bids, underbidding can lead to you short-changing yourself in the process, even if you end up winning the bid. Underbidding means you will be held to the quote even if the project costs more than you anticipated. This means you will not be able to recoup a huge chunk of the costs of materials, the added manpower, or overtime costs—you will need to pay these expenses out of your pocket.
The only exception to such situations is when the plan changes during the project, i.e., a change order is issued. In that case, you will have the opportunity to reevaluate the estimate to provide a new quote for the work. Other than that, underbidding means, you will be responsible for covering any extra costs.
Many people underbid intentionally as part of their overall business strategy. It can, for instance, give them the chance to add a particular project to their portfolio. However, regardless of whether or not you underbid on purpose, the goal is to have a stronghold on what an accurate estimate includes to be able to create more accurate estimates.
Quick Question: Are Estimates the Same as Construction Bids?
Every bid is an estimate, but they are not the same. While there is no hard and fast rule, most of the time, when contractors talk about estimates, they are referring to the costs of labor and materials for a particular project. A construction bid is what gets sent to the client as the final and fixed price for the entire job. It could include things like contact information, project scope, schedule, relevant documentation, terms of payment, existing conditions, and costs. However, cost estimates need to be accurate to enhance profitability if the bid gets accepted regardless of the difference.
How to Improve Construction Estimates To Place Accurate Bids
Evaluate Overall Labor Costs and Productivity
To make money, the first step is to know what the labor will truly cost you. Knowing your crew’s productivity level is also helpful for accurately estimating the time it might take to complete a project. Keep in mind that labor costs involve more than just the employee’s hourly wage. Benefits, taxes, infrastructure, training, union contributions, retirement, insurance, there is a lot that needs to be accounted for. Add all the expenses for a particular period to get an accurate, fully loaded labor rate. Then, add the overhead percentage and mark-up to the cost to get a fair billing rate.
Assessing your crew’s productivity means considering that no two workers will work at the same rate, even in the best of conditions. Factors like lost tools, weather, inadequate skills, personal issues, training, and so on could make it more difficult to calculate the exact number of hours it will take to complete the project. One way to assess labor productivity is to look at past projects and see the man-hours they took. Dividing the number of hours by the total work quantity can give you a ballpark figure on how much your workers can achieve with one man-hour.
Get Ahead of Deadlines
If your team is always working down to the wire when it comes to submitting bids, you do not need to get stressed when playing catch-up. Instead, proactively invest in tools and software to increase your takeoff speed. This helps reduce time wastage in the measurement stage.
If you do not have the time or the resources required, outsource the task to professionals at ADDMORE Services. We can handle the project to ensure you meet all the deadlines accurately. The faster your takeoffs will be performed, the better you will be able to decide which projects are worth bidding in the first place. It leaves you ample time to conduct potential site visits, gather more information, and create a comprehensive proposal that will help you win bids successfully.
Our experts stay updated with the ever-changing costs and trends, so they can help make sure your predicted costs and quantifications are watertight and accurate. We use the latest software to help you succeed from conception to conclusion.
Creating accurate bids is one of the most important aspects of taking your business to new heights. Rushing through the review process to meet tight deadlines is an incredibly common mistake that could cost you $$$. Professionals at ADDMORE Services will thoroughly review all the construction documents in your bid package to ensure you have met all the necessary specifications and requests per compliance and industry standards.
Consistency is Key
Successful bidding requires using consistent data sets. At ADDMORE, we keep the format, coding, costs, processes, and formulas consistent to help our clients achieve more efficient yet accurate bids. It also helps make collaboration easier by allowing clients to be on the same page when it comes to the way of working. Cloud-based solutions have enabled us to use past data and make it accessible easily in one location, which helps create a more suitable collaboration environment.
We would all like to think our crew is perfect, but, at the end of the day, they are human. Accidents and delays can happen at any site. Sometimes people can have unexpected off days, leaving them accomplishing much less than they had intended. They might make mistakes when measuring, leading to them having to scrap some supplies. Account for waste in your estimate by tracking on average per labor, per material, or price. Add this percentage to the total costs to ensure all your bases remain covered.
How to Get High Construction Bid-Hit Ratios
The average profit margin is estimated to be less than 2% for firms with a low construction bid-hit ratio. We know the competition in the industry is fairly exasperating, and you would like to bid on as many projects as possible.
Connect with professionals at ADDMORE Services to access a team of estimators, designers, and drafters with extensive experience in working with a range of clients across diverse industries worldwide.
Their professionals can help you devise robust construction bidding strategies with accurate estimates that will help improve your bid-hit ratio significantly. They offer a range of outsourcing, staff leasing, BPO, and offshoring solutions to help you bid more, win more, and achieve more in considerably lesser costs and resources.
Their high-quality services include BIM modeling solutions, CAD drafting services, construction project management, Revit design services, construction cost services, takeoff estimating services, contract administration, quantity surveying services, architectural drafting services, Primavera modeling services, and more. The reputable BPO company also helps connect to virtual assistants with loads of experience supporting multiple clients across various industries.
They cater to clients in many countries worldwide, including but not limited to the UK, the Republic of Ireland, Australia, New Zealand, the USA, and the Middle East.
Looking to learn more? Head on to the blog section of ADDMORE Services to find informative resources on construction cost estimates and other insights about the AEC sector.